Network Markets and Consumer Coordination

Attila Ambrus () and Rossella Argenziano
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Attila Ambrus: Department of Economics,Harvard University, Cambridge

No 423, IEHAS Discussion Papers from Institute of Economics, Hungarian Academy of Sciences

Abstract: This paper analyzes pricing decisions and competition in network markets, assuming that groups of consumers can coordinate their choices when it is in their interest, if coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium. A monopolist might operate multiple ex ante identical networks to price differentiate. In Bertrand competition different firms might target high reservation value consumers on different sides of the market. Firms can obtain positive profits in price competition. Product differentiation in equilibrium is endogenized by consumers' network choices. Enough heterogeneity in reservation values is necessary for existence of these asymmetric equilibria.

Keywords: two-sided markets; network externalities; platform competition; coordination (search for similar items in EconPapers)
JEL-codes: D43 D62 L11 L14 (search for similar items in EconPapers)
Date: 2004-12
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http://econ.core.hu/doc/dp/dp/mtdp0423.pdf (application/pdf)

Related works:
Working Paper: Network Markets and Consumer Coordination (2004)
Working Paper: Network Markets and Consumers Coordination (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:has:discpr:0423

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